THE LATEST increase in Fonterra's payouts to farmers would be welcome, but mainly used to offset massive price increases, Federated Farmers Wanganui branch dairy section chairman Tony Rogers said yesterday.
Yesterday, Fonterra announced a 60-cent increase in the co-operative's 2007-8 forecast payout to $7.90 per kg of milk solids.
Fonterra chairman Henry van der Heyden said the increase was due to the continued strength of international dairy commodity prices, combined with the company's performance gains.
Mr Rogers said while the payout was "very welcome", farmers were facing "massive increases" in costs for fertilisers, farming chemicals and labour and wouldn't have much left once these costs had been met.
Fertiliser costs represent 20 percent of farm inputs, labour 25-30 percent, fuel 6-7 percent, while feed had also doubled in price.
Mr Rogers said the rising labour costs were due to the "natural expectation" from workers that they should share in the good fortune of dairy farmers through increased wages, and this was an expectation that would have to be met.
A large percentage of the payout would go towards these increasing costs, he said.
The benefit from the increase and the costs faced by farmers depended on the size of the farm, its structure, topography, fertiliser needs and rainfall.
From Maxwell to Whangaehu, there were about 40 dairy farms, with a dozen in the Waimarino and "hundreds" in the South Taranaki area.
Mr Rogers said farmers felt for people paying high prices for dairy products in supermarkets, something that was caused by the same high international commodity prices that had produced the payout.
"No doubt it's difficult for a lot of people," he said.
Oil, rice and grains had all more than doubled in price, but dairy had risen by about 60 percent and Mr Roger believed this would not get any higher in the near future.
Locals buying less dairy as a result of high prices would put little market pressure on Fonterra to lower prices, as it exported about 96 percent of its produce.
However, he believed New Zealand, which has one of the highest percentages per capita of food producers amongst relatively few food-producing nations worldwide, was entering a "golden age", from which everyone would benefit.
Mr Van Heyden said the payout was good news for farmers, in that they would have extra cash flow at a time when they were facing sharply rising input costs, which were up by 32 percent over the last year.
Fonterra's final payout for 2007-8 will be announced in September.
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